The Impact of Challenges to the Logistics Sector in 2022

Supply chains have always faced their share of challenges, but the pandemic has only exacerbated these issues. As a result of panic buying, local and national lockdowns and changing border restrictions, we’ve seen huge shifts in global supply and demand. 

Demand has become even more unpredictable. Many businesses are now stockpiling to meet demand, leading to transportation shortages and increased prices. Logistics companies need systems with strong forecasting capabilities to allow more accurate predictions.

As businesses look to serve both local and international needs, supply chains have become increasingly complex. Interactions between supply chain entities have become harder to manage, with potential risks that will have a knock-on effect throughout the chain. This rising network complexity, therefore, increases the likelihood of supply chain disruptions. 

Managing supply chain risk is key, with companies developing new technologies to help logistics businesses better secure their supply chains.

Many businesses throughout the logistics industry have been affected by labour shortages. Drivers are retiring at an unprecedented rate, while the impact of Brexit and the pandemic have caused further driver shortages. The focus for 2022 will be on training and recruiting more key staff, as well as looking at how automation can help fulfill certain functions, to free up other employees for more important work, as well as streamlining and optimising other operations.

Costs are rising. We’re seeing increases in shipping volumes and diesel prices. Soaring fuel prices and shipping costs will inevitably lead to further supply chain delays, impacting on decision making. In the past 12 months, freight costs rose across all modes of transport, with some areas seeing as much as 20 percent increase. 

Another challenge for the industry to face in 2022 is the drive towards more sustainable practices. At COP26 in Glasgow last year, there was a strong focus on the areas of transport and logistics. With many countries setting ambitious emissions targets, the logistics industry will need to look into developing more sustainable supply chain policies. Companies who can prove they are more sustainable will be more likely to win contracts. 

While in England, restrictions are coming to an end, the same can’t be said for the rest of the world. Logistics businesses will still need to navigate different countries’ restrictions and the potential for new variants to emerge. China, for example, is continuing with its zero-COVID strategy, with tight border restrictions which could lead to further problems for the industry. 

Different countries’ economic uncertainty present further challenges to the sector, impacting demand and increasing the need for cost-cutting measures.

Brexit has already caused a degree of friction when it comes to supply chains, with companies having to deal with more red tape and border checks, as well as all the added costs this creates. With COVID-19 further compounding this, many firms have not been prepared and have suffered major setbacks as a result. It is essential that logistics professionals become more adaptable in the face of these potential risks. 

Despite these challenges, however, the logistics industry has always proven resilient in the face of uncertainty. As the Economist said in a recent article, “the era of predictable unpredictability is not going away”. Logistics firms, while facing their fair share of challenges for the months and years ahead, should focus on their risk management strategies to develop a robust plan for the future.

For advice on risk management and insurance for the logistics industry, speak to a member of the team at Dover Street Insurance Brokers today. Our expertise and knowledge can help you and your business prepare for the future. Call 0208 057 4130 today.